OCC Offers Information Regarding STIF Rule

The Office of the Comptroller of the Currency (OCC) today announced an interim final rule to revise its short-term investment fund (STIF) rule for national banks acting in a fiduciary capacity.

The rule allows the OCC to authorize banks to temporarily extend maturity limits of these funds. The financial markets are in a period of significant stress negatively affecting the ability of banks to operate in compliance with maturity limits identified in the rule.

The rule is effective immediately. The agency will accept comments for 45 days following publication in the Federal Register.

Simultaneously to announcing the interim final rule, the OCC also announced an order extending the maturity limits for STIFs affected by the market effects of COVID-19. The order provides that a bank will be deemed in compliance with the rule if

The STIF maintains a dollar-weighted average portfolio maturity of 120 days or less, as determined in the same manner as is required by the Securities and Exchange Commission SEC) pursuant to Rule 2a-7 for money market mutual funds (17 CFR 270.2a-7);

The STIF maintains a dollar-weighted average portfolio life maturity of 180 days or less, as determined in the same manner as is required by the SEC pursuant to Rule 2a-7 for money market mutual funds (17 CFR 270.2a-7).;

The bank is acting in the best interests of the STIF under applicable law in connection with using these temporary limits; and

The bank makes any necessary amendments to the written plan for the STIF to reflect these temporary changes.

The OCC also determined that the relief provided by this administrative order terminates on July 20, 2020, unless the OCC revises this order to provide otherwise before that date.

The federal financial institution regulatory agencies and the state banking regulators issued an interagency statement encouraging financial institutions to work constructively with borrowers affected by COVID-19 and providing additional information regarding loan modifications.

The agencies encourage financial institutions to work with borrowers, will not criticize institutions for doing so in a safe and sound manner, and will not direct supervised institutions to automatically categorize loan modifications as troubled debt restructurings (TDRs). The joint statement also provides supervisory views on past-due and nonaccrual regulatory reporting of loan modification programs.

The agencies view prudent loan modification programs offered to financial institution customers affected by COVID-19 as positive and proactive actions that can manage or mitigate adverse impacts on borrowers, and lead to improved loan performance and reduced credit risk.

The statement reminds institutions that not all modifications of loan terms result in a TDR.